Interpreting Middle East Economic News and Analyzing Market Trends

Cash rich Qatar looks for distressed assets as cash poor countries line up

Today, Qatar announced the launch of a $12 billion fund to invest in distressed assets around the world.  The country has been investing in top luxury brands over the past couple of years.  It is currently the largest shareholder in Tiffany & Co. according to Reuters, owns Harrod’s department store and has a stakes in LVMH.  Going after distressed assets seems like a departure from the previous strategy.  Here’s more from Bloomberg:

Qatar said yesterday that the new fund, to be called Doha Global Investment, will receive about $3 billion in assets from Qatar Holding LLC, a unit of the country’s wealth fund, and seek to raise the same amount in a share sale to nationals. The Persian Gulf emirate is using wealth from the world’s third- largest gas reserves to acquire assets across the globe.

“Given current low global rates, tight spreads and low volatility, only terrible or European companies now fit in the distressed bracket with significant capital already chasing distressed assets,” said Emad Mostaque, a strategist at Noah Capital Markets in London. “It doesn’t look like an ideal area for investment in the near future.”

Qatar Holding, the foreign investment arm of Qatar Investment Authority, agreed with Credit Suisse Group AG in November to form asset manager Aventicum Capital Management to boost investments in emerging markets.

Long-Term Opportunities

Doha Global Investment will buy assets including real estate, bonds and equities, Hussain Al Abdulla, board member at Qatar Investment Authority, said yesterday. The fund sees investment opportunities in distressed assets in the next decade, said Aladdin Hangari, head of adviser Credit Suisse in Qatar that will advise on the creation of the fund.

Read the full article from Bloomberg.

Qatar’s cash seems to be on every other country’s radar.  Greece, Italy, Malaysia and Egypt are among the recent recipients of Qatar’s cash.  This does not include the other Arab Spring countries, which have received Qatar aid in one form or another…. Read these from Reuters; Qatar Funds Libyan Rebels and Qatar Funds Syrian Rebels. With these headlines it’s no wonder why countries are lining up to receive Qatar’s generosity.  Here’s more on Qatar investing in Greece, Italy and Malaysia:

Qatar and Greece could each invest up to 1 billion euros ($1.35 billion) in a joint fund to support small and mid-sized Greek companies, extending the Gulf state’s support of ailing European economies.

A number of investment projects had been discussed in sectors such as utilities, infrastructure, energy and tourism, Qatar’s prime minister Sheikh Hamad bin Jassim Al Thani and his Greek counterpart Antonis Samaras said in Doha Tuesday.

The Qatari prime minister said the size of the fund hadn’t been agreed, but the Arab Gulf country was prepared to plow EUR1 billion into the joint venture, with the same commitment coming from Greece.

In November, the investment arm of Qatar’s sovereign wealth fund, Qatar Holding, and an investment fund backed by the Italian government agreed to invest up to EUR2 billion in Italian companies over the next four years.

Mr. Samaras said he wanted to make Greece a “pivotal link” between Europe and the Middle East in banking, energy and transport, and construction, as fears recede of a Greek exit from the euro zone.

Read the article from The Wall Street Journal.  Also consider reading Qatar rejoins bid for Greek former airport lease: Athens, from Qatar’s Gulf Today.

Qatar’s investment in Malaysia is even bigger:

Qatar’s sovereign fund anticipates that its investments in Malaysia will surpass the US$10bil (RM30.8bil) mark, which when fully materialised, should make it among the largest foreign investors here.

A big portion of that amount US$5bil (RM15.4bil) will be pumped into petrochemical projects within the country over the next three to four years, particularly in the Pengerang project in Johor.

The investments will come from Qatar Holding LLC, an investment arm of the Qatar Investment Authority (QIA), said Qatar Holding vice-chairman Dr Hussain Ali Al- Abdulla.

Read the full article from Malaysia’s The Star.

What is more interesting is Qatar’s recent $2 billion injection into Egypt to support the country’s disappearing foreign currency reserves:

Egypt’s foreign reserves have risen to $15.5 billion, helped by a deposit by Qatar to support the economy, the North African country’s finance minister said, although reserves are still close to critical levels after being run down to defend Egypt’s currency.

The central bank put reserves at $15.015 billion at the end of December. It has implemented a new regime for buying and selling foreign currency and currency controls to try to stem a fall in reserves, which have tumbled from $36 billion before the uprising that toppled Hosni Mubarak in early 2011.

Qatar said last month it had lent Egypt $2 billion and given it $500 million outright. It has pledged to stand by Egypt to help support the nation, which has been battered by political turmoil and violence that has scared away investors.

Read the full article from Albawaba Business.

See our post from last week; Egypt’s shrinking foreign currency reserves, devaluation is inevitable.  Qatar can only support Egypt’s foreign currency reserves for so long before giving up and letting the currency depreciate as it should.